Toyota in Spotlight After Earnings Carnage at Global Auto Rivals
(Bloomberg) -- Investors are bracing for Toyota Motor Corp.’s business update after global rivals from Detroit to Seoul fell short of estimates and warned of more pain from the trade war.
While the world’s most valuable automaker will likely report modest sales and earnings growth for the most recent quarter, Chief Executive Officer Akio Toyoda faces a fight on every front. Potential U.S. tariffs threaten to cripple demand in its biggest market, rivals continue to pull ahead in China, and at home, the top-selling Prius is suffering a slump in popularity.
Recent swings in the yen will also play a role as Japan’s largest manufacturer reports on Friday at about 1:25 p.m. in Tokyo.
Here are four charts that illustrate Toyota’s challenges:
1. Tariff Threat
Toyota isn’t alone in worrying about a potential U.S. tariff of as much as 25 percent on imported autos and parts, but it may have more at stake than many: Among its best-selling vehicles, almost half come from outside the U.S. All RAV4s -- its most popular model -- are imported into the country.
Even the made-in-Kentucky Camry -- the country’s best-selling sedan, feted by Cars.com as having the most American content -- would see a $1,800 price increase in the event of tariffs on parts, Toyota has said.
The U.S. remains Toyota’s biggest market by far. A quarter of the vehicles it sells globally drive off American lots. And while Japanese peers have increasingly gravitated toward China, Toyota still only sells half as many vehicles there as in the U.S.
2. Chasing China
After watching the chasm with China’s sales leaders Volkswagen AG and General Motors Co. widen to nearly 3 million vehicles last year from about half that in 2010, Toyota is taking new steps to catch up.
Toyota has expanded capacity in China by 200,000 vehicles this year and can now make 1.16 million autos annually. It targets sales of 1.4 million vehicles in 2018, from 1.29 million last year.
That still leaves it trailing Japanese rival Nissan Motor Co., which shifted more than 1.4 million vehicles in China in 2017 and plans to boost deliveries to near 1.7 million this year.
3. Prius Problems
For the first time in years, Toyota doesn’t make Japan’s top-selling car. That title now belongs to Nissan’s Note.
The car that pipped the Prius and the Aqua -- known as the Prius C in the U.S. -- is also a hybrid. Nissan launched its so-called e-Power system at the end of 2016, and the Note was the first to carry it. Japan’s second-biggest automaker installed the technology in the Serena minivan earlier this year.
4. Whither the Yen?
The currency is always the elephant in the briefing room. Despite years spent localizing production to make more cars where they are sold, a one yen move against the dollar still adds or subtracts 40 billion yen from Toyota’s annual operating profit.
While the yen was a touch stronger in the past quarter than a year earlier, averaging 109.17 per dollar instead of 111.13, the Japanese currency has weakened substantially since the end of March.
So far though, only Honda Motor Co. has adjusted its estimate for the exchange rate, projecting the Japanese currency will average 107 to the dollar over the course of the fiscal year instead of 105. Nissan and Mitsubishi Motors Corp. were happy to leave their estimates unchanged at 105.
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